Meta introduced a paid subscription option last year that allowed European Union users to use Instagram and Facebook without ads, aimed at resolving regulatory issues the company faced in the region.
Instead, the plan raised new legal questions.
European Union regulators said on Monday that Meta's subscriptions, which can cost as much as 12.99 euros a month, amount to a “pay or accept” system, requiring users to choose between paying the fee or handing over more personal information to Meta for use in targeted advertising.
Meta introduced subscriptions last year as a way to address regulatory and legal scrutiny of its ad-based business model. The biggest concern was that the company was combining the data it collected about users across different platforms, including Facebook, Instagram and WhatsApp, with information obtained from other websites and apps.
Meta argued that by offering a subscription, it gives users a fair choice.
But regulators said Monday that the system gives users no choice and forces them to pay a price for their privacy. They said Meta's policies violate the Digital Markets Act, a new law aimed at curbing the power of big tech companies.
The law, called the DMA, aims to prevent big tech companies from using their size to force users to accept terms of service that they would otherwise opt out of, including collecting personal data. The concern is that the widespread use of platforms like Instagram and Facebook will force users to choose between handing over their data or not participating at all.
Regulators said the law would require companies to allow users to opt out of having their personal data collected and still receive “alternative but comparable services.”
“Meta's 'pay or consent' business model violates the DMA,” said Thierry Breton, the European Commissioner who helped draft the law. “The DMA is there to give users back the power to decide how their data is used and to allow innovative companies to compete on an equal footing with the tech giants for data access.”
Mehta said in a statement that its subscription service complies with the Digital Markets Act and that it would cooperate with European regulators to resolve the investigation.
Nick Clegg, president of Meta, said last week that Europe was lagging behind economically because of over-regulation. “The complexity of European regulations and the patchwork of member state laws often discourage companies from rolling out new products in Europe,” he said.
Monday's announcement is just one step in a longer process. The European Commission, the executive body of the 27-nation European Union, has until March to complete its investigation. If convicted, Mehta could face fines of up to 10 percent of its global revenue, and up to 20 percent for a repeat offense.
Meta is the second company to be prosecuted under the Digital Markets Act: last week the Commission charged Apple with unfair trade practices related to the App Store.